Producers ponder gas line practicality: potential pipeline builders consider expense, gas availability during feasibility phase.

• Author: Bradner, Mike
• Position: OIL & GAS - Cover story

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Spur lines, bullet lines, Denali and TransCanada pipelines, and LNG. It seems like everyone wants to build a natural gas pipeline. If there's confusion over this, it's understandable.

There are now two competing plans to build large-diameter pipelines from Alaska's North Slope to Canada through Interior Alaska, one by TransCanada Corp. and the second by BP and ConocoPhillips with their Denali--The Alaska Gas Pipeline. Obviously, only one pipeline will really be built, so one of these plans will fall by the wayside. Some people think the two projects could be combined, but provisions in a state license to be issued to TransCanada could complicate this, and possibly prevent it.

There are also plans for a "spur" pipeline to be built from the main pipeline to Southcentral Alaska, on a route from Delta through Glennallen, to bring North Slope gas to the Anchorage area. Gas fields in the Cook Inlet region are being depleted and new gas supplies are needed. A branch of the spur line could go to Valdez to supply gas to a liquefied natural gas (LNG) plant. Gas brought to the Anchorage area could also flow on to the Kenai Peninsula to supply industrial plants at Nikiski.

There is also the "bullet" line. Enstar Natural Gas Co. is studying its own pipeline that could be built from Southcentral up the Parks Highway to the foothills region of the North Slope (a straight shot to the Slope, i.e. "bullet") to bring gas from the Gubik gas deposit now being tested. Enstar says it needs gas and cannot wait for the large pipeline to be built, which would be 2018 or 2020 at the earliest, if it is built at all.

Alaskans have seen plans for gas pipelines and LNG projects before. Each time, market conditions prevented these ideas from moving forward. The consensus now, however, is that the market for natural gas is strong and likely to continue that way, to the point that gas pipeline planners have more confidence.

COST CONSIDERATIONS

There are still some huge uncertainties, however--the biggest is how much the pipeline (or a LNG project, for that matter) will really cost. In 2001, when the three North Slope producers (BP, ConocoPhillips and ExxonMobil) worked together on pipeline studies, the estimate for the project was $20 billion, plus or minus 20 percent, for a pipeline all the way to the Chicago area. More recently, TransCanada estimated costs for its proposal--for a pipeline from Prudhoe Bay to Alberta--at $25 billion. Consultants to...